Withholding tax for non-residents and 12H

When withholding tax (WHT) applies

Non-residents and intermediaries who act on behalf of non-residents are subject to WHT at a rate of 15% where an effective Exchange of Information Agreement (EOI) is in place. The rate applies to the following components of income: 

Australian 'other' income
Taxable Australian Real Property (TARP) capital gains

Where no EOI is in place, the appropriate WHT rate on the above-mentioned income components is 30%.

Non-residents and intermediaries are also subject to a final WHT on any unfranked dividends (at a rate of 30%) or Australian interest income (at a rate of 10%) that they may receive. These rates may be reduced, depending on whether the investor is a resident of a country with which Australia has negotiated a Double Tax Agreement (DTA).

Direct v intermediary obligations

Where a non-resident invests directly in shares or units in a listed trust, the share registry will withhold tax based upon the information that we provide to them.

However, where an intermediary invests in shares, or units in unlisted managed funds or listed trusts on behalf of the non-resident, it will be the responsibility of the intermediary to deduct and withhold any tax for which the non-resident is liable.

Examples of intermediaries include:

custodians
other wrap platforms
trustees of family trusts
trustees of discretionary trusts.

For intermediaries to undertake their withholding obligations, the tax law requires that the payers of distributions to non-residents make available the components of income distributed such that the correct rates of withholding can be applied.

12H distribution schedule

The 12H distribution schedule which is included in the Product Issuer Schedule provides investors with the distribution components for managed investments available on investment menus.

The information provided can assist investors with undertaking their own withholding obligations on behalf of their direct non-resident beneficiaries/investors.

This is usually made available to advisers in mid-late August.

How Macquarie reconciles WHT

Product issuers provide us with the component breakdowns of distributions after each financial year end through product issuer tax statements (generally received between July and October).

As such, prior to the receipt of these tax statements it’s not possible for us to apply the specific withholding rates against the component breakdown of distributions received during the year. Accordingly, where there have been interim distributions throughout the year, we calculate WHT at 15% of the gross distribution at the time the distribution is paid.

Once product issuers have provided us with the actual components that make up each distribution, we calculate the difference between the amount that was withheld throughout the year and the amount that should have been withheld. As a result of this reconciliation, where necessary, an adjustment (deposit or withdrawal) is made to the investor’s Cash Account/Cash Hub.

The Reconciliation of Withholding Tax for Non-Resident Income section of the Tax Report – Detailed discloses the non-resident WHT adjustment for listed equities, unlisted managed funds and listed trusts. The amount also appears on your Tax Report – Summary.

The reconciliation details provided are a guide to the correct tax position for non-resident investors in relation to their unlisted managed fund and equity holdings within our platform. Due to differing individual circumstances and the necessity of applying overriding assumptions and principles in the reconciliation process, we strongly recommend that investors seek independent taxation advice on this matter.

For more information please refer to the relevant section below.

WHT reconciliations when there’s been a change of residency

Where a non-resident has changed residency during the year, we’ve deducted WHT at the correct rates considering any residency change. A residency change may include any of the following examples

a resident becoming a non-resident
a non-resident moving from one overseas country to another overseas country
a non-resident becoming a resident.

Where a non-resident has changed residency, we’ll continue to withhold tax in accordance with their original country of residence until we have received all completed and correct paperwork. Once this paperwork has been received, we’ll update our systems to apply the correct WHT rates (as per the relevant DTA or EOI rates) for unlisted managed funds.

In relation to listed securities, we’ll notify the relevant share registry of any residency change when all completed and correct paperwork is received. The registry will then update their systems accordingly.

You can find the form here at change of status/ change of residency.

We strongly recommend that investors seek independent taxation advice in relation to the accuracy of this reconciliation based on their own individual circumstances.

WHT reconciliations for unfranked dividends and interest

We’ve determined the appropriate WHT rate to be applied based on the country of residence provided by investors
Where investors are resident of a country with which Australia has negotiated a double taxation agreement (DTA), the rate specified in that DTA has been applied
Where the DTA advises more than one rate, the most conservative of those rates has been chosen.

Where investors are residents of a country with which Australia has not negotiated a DTA, the non-treaty WHT rates have been applied (30% for unfranked dividends and 10% for interest amounts).

WHT reconciliations for equities and listed trusts

We’ll perform a notional reconciliation of WHT for equities and listed trusts held within the platform.

For equities and listed trusts, the relevant share registry deducts any WHT based upon the investor’s country of residence (as provided by the investor) and considers whether Australia has negotiated a DTA and/or EOI agreement with the non-resident’s country of residence.

Once we’ve received notification from the share registries, the difference between the amount that was withheld throughout the year and the amount that should have been withheld is calculated and reported.

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